January 24, 2012 / 7:54 AM / 8 years ago

UPDATE 2-Int'l Ferro sees full output in Q1 on likely restocking

* Sees restocking in ferrochrome market in early Feb

* Q4 ferrochrome sales up 39 pct from previous quarter

* Co expects full capacity of 265,000 tonnes per year

* Shares up 10 pct

By Tresa Sherin Morera

Jan 24 (Reuters) - International Ferro Metals Ltd expects full production in the first quarter on ferrochrome restocking by steel mills, and aims to generate cash in the same period despite rising input costs and weak prices, sending its shares up 10 percent.

Sydney, Australia-based International Ferro Metals, which has already achieved 12 percent of its targeted production cost savings, said there was a likelihood of ferrochrome restocking after the Chinese New Year in early February.

In the latter part of 2011, stock levels of ferrochrome — used in stainless steel to prevent corrosion — remained low at mills. A sovereign debt crisis in the European Union and slowing economic growth in top consumer China slowed the pace of global steel production growth.

International Ferro Metals, whose production facilities are located in South Africa, said its production costs could go up on increasing electricity prices in the country.

“On the 1st of April 2012, electricity prices in South Africa will increase another 25 percent... That might put pressure on our bright expectations,” Chief Executive Chris Jordaan told Reuters.

International Ferro Metals, which had been making losses for the last three years, said sales of ferrochrome for October-December were up 39 percent at 58,389 tonnes from the preceding quarter on strong demand from the United States.

Production rose 71 percent to 54,142 tonnes as its furnaces came back on line.

The company expects to operate at full capacity at its facility at 265,000 tonnes per year.

South African utility Eskom has warned that supply of electricity will be tight in January.

“Power cuts by ESKOM could be difficult for IFM to absorb in the current financial climate,” Fairfax said in a note.

“However, if IFM is able to demonstrate that its newly, energy efficient furnaces should be allowed to maintain operation through potential blackouts then this could be good news from the company.”

Prices of ferrochrome fell in the last months of 2011. Prices have recovered marginally since mid-December but remain well below pre-2008 crisis highs.

Shares of the company were up 8.6 percent at 19 pence at 1317 on the London Stock Exchange.

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